There's more to the Stanley Q4 story
The financial press hammered Stanley Black & Decker for its fourth quarter performance and downwardly revised earnings guidance.
For instance, Bloomberg’s headline was: “Black and Decker Plunges as Reality Check Leads to Gloomier Outlook.” And CNBC reported that the company’s fourth quarter earnings report “cast a grim shadow over the company’s 2019 outlook.”
There is a case to be made for a more nuanced view of the company’s growth potential of one of home improvement’s major icons.
The bad news — and the news that sent the stock down a dramatic 15% (it has since recovered some of the decline) — was a Q4 loss, a relatively weak outlook, and some sober macro- economic analysis from the CEO. During a conference call with analysts, CEO James Loree said: “There are signs that the global economic growth is slowing and that the U.S. economy may soon be coming to the end of one of the most enduring recoveries in U.S. history.”
The New Britain, Conn.-based company reported a net loss of $65.9 million for the fourth quarter, compared to net earnings of $28.1 million for the same period a year ago. For the full year, Stanley’s net earnings fell to $646 million from profits of $1.2 billion in 2017.
Loree also talked about a reality setting in: that of slowing growth for industrial companies.
But the call went on for an hour, and there were plenty of other points made of a more uplifting nature. “It’s nothing to do with our market share,” Loree said. “Our market share continues to outperform the market.”
Stanley Black & Decker posted fourth quarter 2018 net sales of $3.63 billion, up 5% compared to fourth quarter 2017 revenues of $3.64 billion. Tools & Storage delivered 7% organic with strength in all major geographies and business units.
And then there was this: “The fact that we ended up delivering 9% adjusted EPS growth in 2018 on 8% revenue growth, which included 5% organic, is quite remarkable,” said Loree.
The tools growth was driven by the continued rollout of the Craftsman brand — the largest product program in the history of Stanley Black & Decker. In the big box channel, Stanley has a deal with Lowe’s to sell the Craftsman line, while its Stanley and FatMax brands have found a home in Home Depot.
Jeffery Ansell, Stanley executive VP & president of Tools & Storage, said the Craftsman brand is exceeding the company’s expectations, as well as the customers’ expectations. The brand acquired from Sears in a blockbuster deal in early 2017 is on track to hit $1 billion in revenue growth by 2021. That’s seven years ahead of the company’s internal schedule, he said.
“This progress is being driven by strong user acceptance,” Ansell told investors.
“As such, we have achieved a 4.6-star rating across well over 1,000 products and outstanding in-store execution by both Lowes and Ace. “
Stanley previously announced that The Home Depot will be the exclusive home improvement retailer (meaning “big box”) for Stanley and Stanley FatMax Hand Tools & Storage product portfolios, both in-store and online. The product will begin to ship in the front half of 2019.
And that’s not to mention Lenox/Irwin acquisitions. “We’re attacking the revenue synergy opportunities which will represent $100 million to $150 million of organic growth over a multiyear period as we broaden the distribution of these products around the world,” said Ansell.
Despite a sober analysis of the economic landscape, CEO Loree has growth on his mind.
”With all these incredibly robust growth catalysts, we are in an excellent position for a successful march to $22 billion of revenue by 2022,” he said.
For instance, Bloomberg’s headline was: “Black and Decker Plunges as Reality Check Leads to Gloomier Outlook.” And CNBC reported that the company’s fourth quarter earnings report “cast a grim shadow over the company’s 2019 outlook.”
There is a case to be made for a more nuanced view of the company’s growth potential of one of home improvement’s major icons.
The bad news — and the news that sent the stock down a dramatic 15% (it has since recovered some of the decline) — was a Q4 loss, a relatively weak outlook, and some sober macro- economic analysis from the CEO. During a conference call with analysts, CEO James Loree said: “There are signs that the global economic growth is slowing and that the U.S. economy may soon be coming to the end of one of the most enduring recoveries in U.S. history.”
The New Britain, Conn.-based company reported a net loss of $65.9 million for the fourth quarter, compared to net earnings of $28.1 million for the same period a year ago. For the full year, Stanley’s net earnings fell to $646 million from profits of $1.2 billion in 2017.
Loree also talked about a reality setting in: that of slowing growth for industrial companies.
But the call went on for an hour, and there were plenty of other points made of a more uplifting nature. “It’s nothing to do with our market share,” Loree said. “Our market share continues to outperform the market.”
Stanley Black & Decker posted fourth quarter 2018 net sales of $3.63 billion, up 5% compared to fourth quarter 2017 revenues of $3.64 billion. Tools & Storage delivered 7% organic with strength in all major geographies and business units.
And then there was this: “The fact that we ended up delivering 9% adjusted EPS growth in 2018 on 8% revenue growth, which included 5% organic, is quite remarkable,” said Loree.
The tools growth was driven by the continued rollout of the Craftsman brand — the largest product program in the history of Stanley Black & Decker. In the big box channel, Stanley has a deal with Lowe’s to sell the Craftsman line, while its Stanley and FatMax brands have found a home in Home Depot.
Jeffery Ansell, Stanley executive VP & president of Tools & Storage, said the Craftsman brand is exceeding the company’s expectations, as well as the customers’ expectations. The brand acquired from Sears in a blockbuster deal in early 2017 is on track to hit $1 billion in revenue growth by 2021. That’s seven years ahead of the company’s internal schedule, he said.
“This progress is being driven by strong user acceptance,” Ansell told investors.
“As such, we have achieved a 4.6-star rating across well over 1,000 products and outstanding in-store execution by both Lowes and Ace. “
Stanley previously announced that The Home Depot will be the exclusive home improvement retailer (meaning “big box”) for Stanley and Stanley FatMax Hand Tools & Storage product portfolios, both in-store and online. The product will begin to ship in the front half of 2019.
And that’s not to mention Lenox/Irwin acquisitions. “We’re attacking the revenue synergy opportunities which will represent $100 million to $150 million of organic growth over a multiyear period as we broaden the distribution of these products around the world,” said Ansell.
Despite a sober analysis of the economic landscape, CEO Loree has growth on his mind.
”With all these incredibly robust growth catalysts, we are in an excellent position for a successful march to $22 billion of revenue by 2022,” he said.